Your step-by-step guide to homeownership

High rents and home prices in the Greater Toronto Area often make saving for a down payment difficult. Yet true affordability depends on the rent-to-income ratio, which may create opportunities for renters to consider homeownership.

Canadian renter households earn about $114,000 annually and spend 28% of their income on rent. Single renters pay a higher share, often 40% or more, underscoring how combined incomes improve affordability. Importantly, lower rents do not always translate into greater affordability if local incomes are also low. The same principle applies to homeownership: balance housing costs with income.

“Can I afford a home?”

A better question than “Can I afford a home?” is “What home can I afford?” Recent declines in GTA home prices give buyers more choices. If you pay $2,750 in rent, compare that to the total monthly cost of owning, including mortgage, taxes, fees, insurance, utilities, and maintenance. Sometimes, a $450,000 condominium with a substantial down payment can have similar monthly costs, depending on rates and fees.

First-time-buyer programs (such as the First Home Savings Account, the RRSP Home Buyers’ Plan, and Ontario’s land-transfer tax refund) can help with down payments. Expanding your search beyond Toronto’s priciest neighbourhoods or considering older condominiums can also improve affordability.

Another option is to purchase property with rentable space, such as a secondary suite, to help offset costs. However, be mindful of risks such as vacancies and additional maintenance. Remember, homeownership includes expenses beyond the mortgage and requires an emergency fund.

While renting provides flexibility and fewer responsibilities, those with stable finances may benefit from putting housing costs toward building equity. Affordability and financial strength depend on multiple factors; always consider the full range of costs involved in ownership.

Your first home does not have to be your dream home; it can be a steppingstone. Focus on properties with monthly costs that fit your budget. Homeownership may not be possible for everyone right away, but for some, it is closer than expected.

Begin by reassessing your housing expenses. If rent exceeds 28% of your income, consider more affordable options and save the difference. Choosing housing with utilities included can also free up funds for a down payment.

If your parents have extra space, moving in with them can help you save for a down payment. Taking on household responsibilities and exploring family support, such as home equity, can help you progress faster.

Remote workers might consider relocating to smaller towns with lower rents and home prices. Buying a pre-construction property can also let you start with a smaller down payment and build equity as the home is completed.

“What home can I afford?”

Rent-to-own options let you rent a home with the option of purchasing it at a predetermined price within a specified period, often five years. A portion of your rent goes toward your future down payment, helping you build equity and credit while gaining stability. Consult a lawyer before entering into any agreement.

Some renters choose to invest in stocks or other assets rather than buy a home. Investment gains are taxable, whereas profits from selling your principal residence are tax-free. Renting may be less stable because landlords can end your lease, whereas owning provides both a place to live and a long-term investment.

Inflation erodes the purchasing power of money over time, and investment returns may not keep pace. Real estate can hedge against inflation because property values tend to rise as the currency weakens. Rent increases with inflation, but homeowners can eventually pay off their mortgage and build lasting wealth.

If you want to transition from renting to owning, set a clear goal. The SMART framework (Specific, Measurable, Achievable, Realistic, and Timely) can help you stay focused and increase your chances of success.